Structuring takeover transactions

1. Commercial Contract Drafting Arief Surowidjojo May 1st, 2012 Structuring takeover transactions

2. Structuring takeover transactionsthe consideration • No or minimum legal constraints • Access to internal information and documents of the target • Extensive due diligence coverage, exercise and timing • Speed of transaction • Effective control • Exit options • Ability to set up team work • Supports from the governments, executives, shareholders, employees and community • Costs of acquisition • Acceptable structure by market standards

3. Structuring takeover transactions (1) ABC Corp., an English private equity investment company owned operating from the British Virgin Islands with sub-holding companies all over the world wishes to invest in Indonesia in order to get a better margin in resources business. The objective is to acquire control in large potential resources companies, and sell the investment for a better margin to strategic investors or through capital market mechanics within approximately 5-year period. ABC Corp., sees potentials in the following targets. Please help ABC Corp., in implementing such business plan. (1) PT DEF Tbk., a state-owned company engaged in coal mining extractive business. Republic of Indonesia owns 80% of the issued shares, and the local government of Ogan Komiring Ilir (OKI) owns 8%), and the remaining shares are owned by the public. The Indonesian government offers to sell 20% of its equity, and OKI offers 3% of its shares in PT DEF Tbk. The mines are in commercial production stage of 2 million tons /annum, and will last for 15 years with a relatively good quality coals. If the take over is realized, ABC Corp., will have a representation in one director and one komisaris position out of respectively 5-members boards. OKI is a regency with a lot of potentials in coal mining resources, and there will be opportunities for PT DEF Tbk., to expand its operations, despite the fact that the Indonesian Government and OKI are not interested to spend cash injection to PT DEF Tbk. PT DEF Tbk., is a profitable company but not efficiently operated.

4. Structuring takeover transactions (1) (2) PT GHI Tbk., a general trading company, including mining products, having a liquidity problem and has been behind schedule for repayments of its loans to bankers and suppliers, and is now struggling to prevent a bankruptcy petition by its lenders, the total amount of its debts is US$ 200 millions. It does not include corporate income tax liabilities for the years 2009 and 2010 owing to the Government. 80% of its shares are being offered for sale. (3) PT JKL, a green-field coal mining company with a proven potential resources of 1 billion tons of high-calorie coals extractable for 50 years. The mining side of this company is overlapped with 30% of a palm oil plantation covering an area of 7,000 ha, owned by a Dutch JV company. The holding company of the Dutch partner is restructuring the main business that result in consolidation of their business only for European operations.

5. Structuring takeover transactions (2) The shareholders of PT MNO Tbk., a holding company in various businesses, have decided to focus their business to a service industry. PT MNO Tbk., has huge debts that have been due and payable. Presently it has subsidiaries in the following businesses: equipment manufacture, coal and gold mining operations, oil, gas and mining contractors and engineering consultants, retail mini-shops all over Indonesia, stock piling and ports facilities, shipping and land transportation, banking and micro finance, IT venture capitals, and pharmaceutical industry and trading. How could you help PT MNO Tbk., in implementing such restructuring?